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Chief Financial Officer's (CFO) Report to the Board

301 Moved Permanently

301 Moved Permanently


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III. Budget Results - Second Quarter 2009

Approved Budget and Staffing Modifications

The 2009 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2009 Corporate Operating Budget. The following budget reallocations were made during the second quarter in accordance with the authority delegated by the Board of Directors (they did not change the total 2009 Corporate Operating Budget approved by the Board):

  • In April 2009, the CFO approved the reallocation of budget authority within the Salaries and Compensation expense category of the Ongoing Operations component of the 2009 Corporate Operating Budget to reflect updated salary and benefit expense estimates for all divisions and offices, except for the Office of Inspector General. This reallocation followed a comprehensive analysis of the approved authority for salaries, bonuses, and fringe benefits as of March 31, 2009. Excess funds totaling $1,826,717 were identified and reallocated to the Corporate Unassigned budget and will be available to meet new budget requirements that emerge during the year.1
  • In April 2009, the CFO approved the reallocation of budget authority within the Ongoing Operations component of the 2009 Corporate Operating Budget to provide funding for laptops and other equipment for new employees and contractor staff. The Equipment expense category of the Division of Information Technology (DIT) budget was increased by $2,576,085, and the Corporate Unassigned budget was decreased by the same amount.
  • In April 2009, the CFO approved the reallocation of $152,000 in budget authority within the Salaries and Compensation expense category of the Ongoing Operations component of the 2009 Corporate Operating Budget from the budget of the Chief Operating Officer (COO) to the budget of the CFO in connection with the addition of a position in the CFO’s office to assume work responsibilities transferred from the COO’s office.
  • In April 2009, the CFO approved the reallocation of $1,000,000 in budget authority within the Ongoing Operations component of the 2009 Corporate Operating Budget from the Corporate Unassigned budget to the Outside Services – Other budget of the Office of Public Affairs to continue the FDIC public service announcement campaign and outreach focusing on deposit insurance and encouraging the use of the enhanced Electronic Deposit Insurance Estimator (EDIE).
  • In May 2009, the CFO approved the reallocation of $34,595,471 in budget authority within the Receivership Funding component of the 2009 Corporate Operating Budget from the Corporate Unassigned budget to the budgets of the Division of Resolutions and Receiverships (DRR), DIT, Division of Administration (DOA), and Corporate University (CU) for the establishment of the temporary East Coast Satellite Office (ECSO)2 . DRR received $20,386,767 (Salaries and Compensation $18,333,467 and Travel $2,053,300); DIT received $6,619,277 (Salaries and Compensation $403,632, Outside Services – Personnel $559,999, Equipment $5,417,970, and Outside Services–Other $237,676); DOA received $7,452,973 (Salaries and Compensation $1,049,425, Buildings $4,039,212, and Equipment $2,364,336); and CU received $136,454 (all in Salaries and Compensation) of the reallocated budget authority.
  • In May 2009, the CFO approved the reallocation of $8,533,213 in budget authority within the Receivership Funding component of the 2009 Corporate Operating Budget from the Corporate Unassigned budget to the Salaries and Compensation budget of DRR to fund 165 newly-authorized positions.
  • In May 2009, the CFO approved the reallocation of $787,782 in budget authority within the Receivership Funding component of the 2009 Corporate Operating Budget from the Corporate Unassigned budget to the Salaries and Compensation budget of the Office of the Ombudsman (OO) to fund 12 newly-authorized positions. The reallocation was implemented in June.

The 2009 Budget Resolution delegated to the CFO the authority to modify Authorized 2009 Staffing for divisions and offices, as long as those modifications did not increase the total approved 2009 Corporate Operating Budget. The following changes were approved by the CFO in accordance with the authority delegated to him by the Board of Directors:

  • In April 2009, the CFO approved an increase of one authorized permanent position in the CFO’s office to provide support to the COO’s staff with its growing Board case review workload, and for work related to Temporary Liquidity Guarantee Program (TLGP), Legacy Loans Program (LLP), and other high priority initiatives. A budget adjustment was made in the Ongoing Operations budget component in conjunction with this approval.
  • In April 2009, the CFO approved an increase of 38 authorized positions (14 permanent, 24 non-permanent) in DOA. Most of these positions were approved to address increased workload demands on DOA in Washington and Dallas that are attributable to factors other than the increase in receivership and resolution activity and will be funded through the Ongoing Operations budget component. The CFO determined that sufficient funding would be available for these positions for the balance of 2009 in that budget component through the reallocation of surplus budget authority during the mid-year budget review process.
  • In April 2009, the CFO approved an increase of one authorized non-permanent position in the Office of Legislative Affairs to assist with its rapidly growing workload and will be funded through the Ongoing Operations budget component. The CFO determined that sufficient funding would be available for these positions for the balance of 2009 in that budget component through the reallocation of surplus budget authority during the mid-year budget review process.
  • In May 2009, the CFO approved an increase of 12 authorized non-permanent positions in OO. These positions will be distributed equally among the Irvine, Jacksonville, and Dallas offices. A budget adjustment was implemented in June in the Receivership Funding budget component in conjunction with this approval.
  • In May 2009, the CFO approved an increase of 363 authorized non-permanent positions for the temporary ECSO. The newly authorized positions were in DRR (+343), DOA (+13), DIT (+5), and CU (+2). A budget adjustment was made in the Receivership Funding budget component in conjunction with this approval.
  • In May 2009, the CFO approved an increase of three authorized permanent positions in the Office of Enterprise Risk Management to support its rapidly growing risk assessment workload associated with the increase in the corporation’s business activities and workload. These positions will be funded through the Ongoing Operations budget component. The CFO determined that sufficient funding would be available for these positions for the balance of 2009 in that budget component through the reallocation of surplus budget authority during the mid-year budget review process.
  • In May 2009, the CFO approved an increase of 165 authorized non-permanent positions in DRR for its Dallas (+139), Washington (+21), and Irvine (+5) offices due to current and projected workload. A budget adjustment was made in the Receivership Funding budget component in conjunction with this approval.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below. Significant spending variances for the six months ending June 30, 2009, are defined as those that either (1) exceed the YTD budget by $2 million and represent more than three percent for a major expense category or total division/office budget; or (2) are under the YTD budget for a major expense category or division/office by an amount that exceeds $3 million and represents more than five percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were significant spending variances in two major expense categories during the second quarter in the Ongoing Operations component of the 2009 Corporate Operating Budget:

  • Outside Services-Personnel expenditures were $6.3 million, or 8 percent, more than budgeted. Approximately $2.6 million of this variance was attributable to expenses related to document management services provided to DRR, which were erroneously charged ton the Ongoing Operations budget component (this error will be corrected during the third quarter). In addition, approximately $1.9 million was spent on unbudgeted financial advisory services obtained in connection with preparatory work for the proposed Legacy Loan Program (LLP). The cost of contract services provided in support of IT systems maintenance and server operations also exceeded budgeted amounts during the quarter.
  • Buildings expenditures were $3.2 million, or 10 percent, less than budgeted. The variance was due to delays in the relocation and build-outs of the New York Regional Office, the Chicago Regional Office, and the Boston Area Office.

Receivership Funding

The Receivership Funding component of the 2009 Corporate Operating Budget includes funding for expenses that are incurred in conjunction with institution failures and the management and disposition of the assets and liabilities of the ensuing receiverships, except for salary and benefits expenses for permanent employees assigned to the receivership management function .

There were significant spending variances in five major expense categories through the second quarter in the Receivership Funding component of the 2009 Corporate Operating Budget :

  • Salaries & Compensation ($26.4 million, or 47 percent, less than budgeted).
  • Outside Services - Personnel ($47.6 million, or 18 percent, less than budgeted).
  • Travel ($20.0 million, or 68 percent, less than budgeted).
  • Outside Services - Other ($8.7 million, or 63 percent, less than budgeted).
  • Other Expenses ($11.6 million, or 46 percent, less than budgeted).

These variances occurred primarily because bank closings have been less costly to administer than anticipated due to the prevalence of structured and whole bank transactions for the first six months of 2009; and budgeted positions have not been filled as quickly as projected in the original Board approved budget. These factors led to lower-than-budgeted costs for asset management and liquidation, outside counsel, travel, and other expenses. With the expected increase in bank failures and resolution activities during the second half of the year, Receivership Funding expenditures should increase each quarter as the number of bank closings increases and the cumulative inventory of assets under management grows. Based on that assumption, we project that all or most of the surplus budget authority in the Receivership Funding budget component will be utilized by year-end.

Significant Spending Variances by Division/Office3

Four organizations had significant spending variances through the end of the second quarter:

  • DRR spent $72.4 million, or 19 percent, less than budgeted. This reflected the net impact of under spending of approximately $80.4 million in its Receivership Funding budget for the reasons identified above and over spending of approximately $8.0 million in its Ongoing Operations budget due to the coding error referenced above, unbudgeted expenses for financial advisory services for LLP, and higher-than-budgeted expenses for travel in connection with recruiting and selection activities for the temporary West Coast Satellite Office, travel related to IT systems, and employee relocations.
  • The Legal Division spent $27.7 million, or 31 percent, less than budgeted. Approximately $23.6 million of this variance was due to under spending in its Receivership Funding budget because budgeted positions were not filled as projected and bank closings and resolution activities have required substantially less contractual legal services to date than anticipated.
  • DOA spent $14.9 million, or 14 percent, less than budgeted. This variance was largely attributable to delays in building out and relocating employees to new office space in the Boston Area Office, the Chicago Regional Office, and the New York Regional Office; temporary delays in purchasing Furniture, Fixtures and Equipment for those build outs; and lower-than-expected cost for leasehold improvements due to landlord concessions at the temporary West Coast Satellite Office.
  • DIT spent nearly $4.5 million, or 4 percent, more than budgeted. This variance included approximately $1.0 million in unbudgeted systems development and maintenance expenses in support of TLGP. In addition, DIT accelerated its planned purchases of equipment, including $1.0 million for servers and $0.8 million for storage and network monitoring software. Contract expenses for operations and control of the mid-range IT platform also exceeded DIT’s year-to-date budget by $1.3 million. Some of these first half expenses may be offset by under spending during the second half of the year.

 

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1The Corporate Unassigned budget within the Ongoing Operations component initially included only $2.5 million in unallocated funding approved by the Board in December 2008 for unanticipated expenses related to the implementation of TLGP, TARP, and other initiatives designed to address the credit and liquidity problems within the U. S. economy. As reported at the end of the first quarter, $1,749,368 was reallocated to this budget in February 2009, in connection with adjustments to the awards budgets of divisions/offices.
2The Corporate Unassigned budget within the Receivership Funding component initially included $64.2 million in unallocated funding approved by the Board in December 2008 for budget requirements that emerge during the year in conjunction with receivership and resolution activities.

3Information on division/office variances reflects variances in both the Corporate Operating and Investment Budgets.





Last Updated 09/02/2009 dofbusinesscenter@fdic.gov

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